Your Stock Portfolio. Cadila Healthcare in a long-term uptrend

Please advise on the levels for buying the stock of Cadila Healthcare.

Mukesh Kumar

Cadila Healthcare (₹516.3): The stock of Cadila Healthcare is in an uptrend across all-time frames — long, medium and short term. This stock has been resilient, when other pharma stocks have been trending downwards.

Following a sharp rally in late May and early June, the stock broke above significant resistance at ₹500 and encountered next resistance at ₹550. The level of ₹500 has now turned into a key support level.

The stock trades well above its 50 and 200-day moving averages. It has been on a corrective decline since encountering resistance at ₹550 in early June. This decline can find support at ₹500 in the short term. But a fall below the immediate support level of ₹500 can see the stock extending its decline and finding support at ₹450 levels. The stock has a significant long-term support in the ₹420-430 band. Key supports below ₹420 are placed at ₹400 and ₹375.

Investors with a long-term perspective can buy the stock in declines with a long-term support at ₹410. Resumption of the uptrend and an emphatic break above ₹550 can take the stock northwards to ₹600 in the long run.

I hold shares of Eros International at ₹227 and Sree Rayalaseema Hi-Strength Hypo at ₹139. Please advice on the outlook for these two shares.

Harvinder S Bhatia

Eros International Media (₹216.2): After a medium-term uptrend from the November 2016 low of ₹150, the stock encountered a key resistance at ₹308 in March 2017. But the stock reversed direction as there was lack of buying interest to sustain the uptrend.

Since then, the stock has been on a medium-term downtrend. A significant support in the ₹205-210 band as well as 200-day moving average poised in this zone, provided base for the stock in late May. The stock can test the support band between ₹205 and ₹210 in the near term.

A further slump below this zone will strengthen the downtrend and drag the stock down to ₹190 and then to ₹180 levels in the short term. Strong decline below ₹180 can pull the stock down to ₹150-₹160 range in the medium term, from which it had bottomed out last November. That said, the immediate support band can keep the stock moving sideways in the ₹205-245 range.

Strong upward break of the key resistance at ₹245 can bring back bullish momentum and take the stock higher to ₹260 and ₹280 levels in the medium term. You can consider holding the stock with a stop-loss at ₹200. However, you can consider partially exiting and repurchasing at lower level if the stock decisively falls below ₹205 levels. Long-term targets on a conclusive break above ₹300 are ₹340, ₹360 and ₹400.

Sree Rayalaseema Hi-Strength Hypo (₹128): The stock has been on an intermediate-term sideways consolidation phase in the ₹115-150 range since November 2016. In late May, the stock fell below its 200-day moving average and continues to trade below it.

Short-term trend has been down for the stock from its April peak of ₹160. To alter this downtrend, the stock needs to emphatically move beyond the 200-day moving average poised at ₹132 initially and a key resistance at ₹140 levels.

Such a move can push the stock higher to ₹150 and ₹155 levels in the short term. An emphatic break above the upper boundary at ₹155 can reinforce the bullish momentum and take the stock up to ₹165 and ₹180 in the long run.

However, plunge below the base level of ₹115 can drag the stock down to ₹100. Further decline below ₹100 can intensify the downtrend and pull the stock to ₹90 and ₹75 in the medium term. You can consider exiting and re-entering at lower levels with a stop-loss at ₹95.

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